Oil

In mid-December 2009 the Organization of Petroleum Exporting Countries (OPEC) held its annual meeting in Angola. Besides agreeing to keep oil prices at their current level of between $70-$80 a barrel, Iraq was the other hot topic of debate.

In mid-December 2009 the Iraqi Oil Ministry carried out its second round of bidding on oil fields by international companies. Winning offers were made on seven of the ten fields up for auction. Afterward Oil Minister Hussain Shahristani said Iraq could reach eleven million barrels a day in capacity in six years, which could make it one of the largest producers in the world. This may turn out to be a major setback for the Kurdistan Regional Government (KRG), and its own petroleum policy.

Iraq recently completed the second round of bidding on its oil fields, which will hopefully usher in the return of international petroleum companies to Iraq that will bring in much needed investment and know how. This round went much better than the first with deals for seven of the ten fields up for auction.

The latest numbers for Iraq’s oil industry are out, and they show that while production declined in November 2009, exports actually increased. Last month, Iraq produced an average of 2.36 million barrels a day of petroleum, while exporting 1.99 million barrels a day. In October Iraq produced an average of 2.50 million barrels, and exported 1.89 million barrels.

The second round of bidding on Iraq’s oil fields ended on December 12, 2009. It was much more successful than the first round that occurred in June 2009. That auction only produced one successful contract, although two more were negotiated afterward. This round garnered seven deals for the ten fields up for bid.

October 2009 saw the third straight month that Iraq’s oil exports dropped. Last month Iraq produced 2.50 million barrels of oil a day, and exported 1.87 million. That was down from September when the same amount was produced, but 1.95 million barrels a day were exported.

As reported before, Iraq’s oil production and exports have fluctuated up and down since the U.S. invasion in 2003. In 2009 Iraq has averaged 2.28 million barrels a day in overall production, and 1.83 million barrels in exports. Those are only estimates however by the Oil Ministry because hardly any of the industry has meters to get accurate numbers. In July 2009 the Board of Supreme Audit, one of three anti-corruption agencies in Iraq, reported the following about recording the Ministry’s production:

Iraq recently signed a number of new oil deals and has plans to move ahead with several others in the coming weeks. These are part of the Oil Ministry’s plans to open up Iraq’s resources to joint ventures with foreign companies to boost petroleum production to 7 million barrels a day in seven years. This is desperately needed as oil provides almost all of the Iraqi government’s revenue, and Iraq needs billions for development and reconstruction.

In June 2009, Iraq held its first round of international bidding on its oil fields. Out of six oil and two natural gas fields, only one, Rumaila in Basra tendered a winning bid. The Iraqi Oil Ministry was widely criticized as a result, with many believing they set unrealistic terms for oil companies, and simply expected the country’s large potential to draw in investors. Since then Baghdad has tried to finalize the Rumaila deal and negotiate new ones.

Iraq’s cabinet has passed a new preliminary 2010 budget. It stands at $67.29 billion, an $8.4 billion increase from 2009. Like previous budgets, the overwhelming majority of the spending will go towards operational costs. Of the $67 billion, 73%, $49.17 billion will be for salaries, pensions, etc. That leaves only $17.83 billion for the capital budget that goes towards development and infrastructure.